BiggerPockets Real Estate Podcast - 208: Buying 41 Units on Your First Deal + Mobile Home Park Investing with Jack Baczek

Episode Date: January 5, 2017

Most people begin their real estate investing with a small single family purchase. Some even start with a duplex or triplex. But today’s guest on the BiggerPockets Podcast skipped the intro phase and jumped right into a 41-unit property early in his 20s! Today, you’ll learn how Jack Baczek used a strategy not before mentioned on the podcast to invest in 41 units, as well as his transition to mobile home park investing (and why that niche ROCKS). Jack’s story is truly inspirational, and you’ll walk away from this interview inspired, entertained, and pumped up to take massive action on your own business! In This Episode We Cover: How Jack got started with real estate How he stumbled upon what ended up his first deal at age 21 What exactly a fractured condo is How he found his first deal of 21 units How he financed this huge deal A warning against hiring the wrong property manager How having parents who invest in real estate affected him Why he sold the 41-unit property Why he made the shift to mobile home parks What a mobile home park deal looks like Reasons to invest in mobile home parks The changes he made to the park to make it rent-ready Why there’s a bad stigma on mobile parks Why Jack fell in love with direct mail marketing The downsides of owning a mobile home park Where is he now in terms of scaling his business What an assignment fee is Tips for trying to read the market What the next five years look like for Jack And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Webinar BiggerPockets Podcast BiggerPockets Keyword Alerts BP Podcast 111: A Unique (and Profitable) Real Estate Niche You’ve Probably Never Considered with Jefferson Lilly BP Podcast 195: Partners, College Town Rentals, & Mobile Home Parks with Rudy Curtler BP Podcast 075: Mobile Home Investing and Getting Started With John Fedro 9 Loopnet CraigsList Dreamwork Trolls: Sing With Us Books Mentioned in this Show Emerging Real Estate Markets by David Lindahl 30 Days of Successful Due Diligence on Mobile Home Parks by Frank Rolfe & Dave Reynolds The Intelligent Investor by Benjamin Graham Tweetable Topics: “I think having a good market is really important.” (Tweet This!) “I think it’s important to really focus on good deals with value add and upside.” (Tweet This!) “If you get a mediocre deal, chances are it could go sour. I’d rather try and find something that looks really promising.” (Tweet This!) Connect with Jack Jack’s BiggerPockets Profile Jack’s Website Learn more about your ad choices. Visit megaphone.fm/adchoices

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and get a $100 Amazon gift card. That's bill.com slash bigger pockets. This is the Bigger Pockets podcast show 208. I think this summed it up really well. Hey, I'm not giving up today. There's nothing getting in my way. And if you knock, knock me over, I will get back up again. There you go. That's awesome.

You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. your home for real estate investing online. What's going on, everybody? This is Josh Dorkin. Host to the Bigger Pockets podcast here with my co-host, Mr. Brandon Turner. What's going on, Shaggy?

I don't know what you did with my host, Josh Dorkin, but for those people who are watching the YouTube version of this, there's a very rugged, not handsome, but rugged, homeless-looking man who is now hosting the Bigger Pockets podcast. You're trying to look like me, I think. You got a nice little beard going. I don't know what you're talking about. Oh, this?

I shave this morning, Brandon. I'm sure you did. I'm sure you did. Josh has a nice five o'clock shadow. All right. Thank you, Ron Swanson. All right. No, it's a nice looking homeless beard.

I like it. Really, says the man who's got a mouse crawling around in his chin. It's not a mouse. It's a worm. It just kind of wiggles in and out. Oh, boy. Yes, thank you for recognizing the handsomeness that is emboating from this face. You've also got a plaid shirt on.

So you've got a beard and a plaid shirt. You really are trying to be me. You're still like four foot nine, so it's not going to wear it. I'm just here to mock you, Brandon. That's all. Thanks. Good, good. I'm all right.

I'm all right. You know, it's a brand new year. This is the first episode, I believe, of the new year, though we're recording this a couple weeks ahead of time, but happy new year. And, yeah, 2017. It's glorious. Yeah, 2017 is going to be a good year. I feel it.

I feel it in my bones. Yeah, that's great. Yeah, no, I'm excited. I'm excited. Yeah. For all of you guys listening, you know, this is the new year. You know, it's funny after doing this for 12 years now, it's fascinating to see what we lovingly call the New Year's effect, which is lots and lots of people get excited about something new when New Year's comes. and by the way, we always tell them, hey, whenever you get excited, just do it.

Don't wait until New Year's. Just do it, right? But people need an excuse, I guess. So when New Year's comes and January is here, you see lots of new, excited, would-be real estate investors. And then, of course, over time, that starts to fade a little bit. But happy January effect, everybody, if you were thinking about it, this is a great time to get involved, start learning, start educating yourself on real estate investing. Definitely encourage folks to, you know, listen to the podcast, jump on the side

check out our countless thousands of articles and the millions of forum posts on our forums so they can educate themselves and get the ball moving for 2017. Are you done talking? What? I fell asleep there from another. I am talking about important things. Yeah, yeah. No, you want to know something important?

I just thought of something while you were talking because I was kind of zoning out. No. First thought in 2017, hey, it only took five days. This is a big thought. you're going to be actually really excited. I thought of this. You know what today is? Do you know what today is? This is the four year anniversary of the Bigger Pockets podcast. This is. This is the four year. Our very first, because 52 times four is 208 in this episode 208. So we started this the first Thursday of January in what was it, 2012. Two, three. Three. No, 13, 13, 13. I know. We're really bad at math. I know. You my finger is like 14, 15, 16, 7. Yeah. Okay. Yeah.

That one year it was for a second. Well, anyway, that's exciting, though. Four years. Wow. We have not missed a single week. Not one week in four years. That's impressive. You and I, you know, we've had a couple shows where we have not hosted, but the show, the show must go on.

The show must go on. So congratulations on four years. As Fredi Mercury once famously said. Is that what he said? I let he said, we are the champion. Show must come. All right. Anyway, welcome, guys.

We got a good show today. Yeah. Yeah, yeah, very, very exciting. about it talking about some, I think, some higher level stuff, but it's a great show for everybody. And if we talk about commercial real estate, we talk about some mobile home stuff. We'll dig in in a second. But before we do, why don't we get to today's quick tip? Hi, guys, today's quick tip. We've given this one before, but it's so important. And we're going to repeat it again, keyword alerts on BiggerPockets. So if you go to BiggerPockets.com slash alerts, you can see a list

of the keyword alerts that you have set up or not set out. Keyword alerts are great for keeping track of your local market, but chances are your city may also be a city in another state. So you can actually specify your state or exclude other states in your keyword alerts by adding or excluding other words. So our keyword alerts allow you to say like, hey, you don't want to just look at Lawrence. You want to look at Lawrence, Kansas versus Lawrence, New York, things like that. I have mindset. I have Aberdeen, right, is a town I invest in. But there's an Aberdeen, Maryland and in Aberdeen, South Dakota. And so what I did is I did Aberdeen, and then excluded the keyword Maryland or MD.

So either one of those, if it pops up, I'm not going to get notified about those. Same with South Dakota. But these alerts are great. So anytime we're talking about local topics, you want to hear about it. You want to be involved in what's going on in your local market or the market where you are investing. So setting up a keyword alert will trigger you when conversations are happening around that, when people have opportunities in those areas, anything local. So go ahead and set up a keyword alert today at biggerpockets.com slash alert.

and yes, once again, slightly long-winded, but there you have it. All right. Well, yeah, when we get on with today's show, so again, today's show we're talking with a guy named Jack, and Jack is doing some really, really cool stuff, both with multifamily and with mobile home parks. You've never heard our discussions on mobile home parks before here on the podcast. They are fantastic. And we'll put some in the show notes at BiggerPockets.

com, show 208. We'll put links to other episodes that talk about mobile home parks as well. Make sure after you listen to this one, go listen to those if you want more information as well. But this is a fantastic show. I just love his, I don't know, the way that he didn't jump into a house, like a single family house, like Jack jumped into a 41 unit property, his first deal. Whoops. Yeah, it's amazing.

Like, I love that story. I love that just massive actions. All right, guys, today's guest is Jack Basak. And as Brandon just said, Jack just really jumped right in, man. I mean, 41 units in his first property ended up getting into the mobile home park space after that and has done all sorts of stuff buying hold. He's done wholesaling of mobile home parks. It's fascinating. Lots of great discussion about opportunities, how to find them, and how to focus on a niche where there's not a lot of attention and definitively a lot of opportunities. So stay tuned and let's get to it.

All right, Mr. Jack Bacack, welcome to the show, man. It's good to have you here. Thanks for having me. I appreciate it, guys. Yeah, this should be fun today. We had a show, we've done a couple shows on mobile home parks back in the day, and there were some of my favorite shows we've done. Because it's a niche that, obviously, you do more than that, but that's what I got excited when I saw your kind of bio, because those are some of my favorite shows, and we don't talk a lot about it. So we'll get into that a little bit later. But before we get to that part, how did you get started with real estate? Well, I got started after college. I started thinking, what should I do with my life? And it was going to start looking at getting a job. I guess even before that,

my parents had a few rentals, so I kind of helped them out with some stuff, handling some tenant issues, leases, some basic repairs. And then when I was younger, my parents owned a 12-unit apartment building, so I got to go out with them and do a lot of fun stuff like repairing toilets and collecting change out of the laundry machines. And then I thought, you know, my logic was before I got a real job, I thought I should go ahead and invest in real estate, try and build a passive income. I was really sold on the concept of real estate and specifically multifamily investing. It made a lot of sense to me. So I really hammered down and started kind of looking at all the resources I could find about it. And that's kind of how I got my start. I made the determination.

This is what I want to do. And the question was how to execute the plan. So you're 21 years old. Yeah. Yeah. At the time I was 21, 22. And you're saying, all right, I don't want to get a job. Before I have any money, before I have any resources, I want to start building passive income. And then I'll figure everything else out. Was that kind of the mindset? Yeah, absolutely. Nice. So then, you know, I grew up in Chicago. And around here, things are kind of crazy expensive. And so that was also around the time 2007 where things were still kind of bonkers and prices. The numbers didn't make sense.

I kind of studied the concept of Dave Lindahl on emerging markets. And I started looking at other places. And Josh, just so we can get out of the way, yeah, Detroit was one of them. I didn't hear you. I'm sorry. I think there's static here or something. I was really attracted by the cheap prices. I mean, when you looked at it on paper and you could buy an apartment for $5,000,

I guess the question you'd have to ask is why are they only showing Google Street. I'm just pictures and out of the actual building. But, you know, so I ended up having my first deal under contract in Oklahoma. It was reasonably priced, and I started doing due diligence on it, and it ended up falling apart. And then a few months later, I found a fractured condo deal in Texas around the Houston area, and that was our first acquisition. Okay, so I've got a lot of questions based on that. So you talk about first deal under contract in Oklahoma, then found a first deal.

Fractured condo deal. Where was that? In Oklahoma or the one in Texas? In Texas, that's what it was. Okay, so here's the question I have. You're in Chicago, you're 21 years old, and you're looking at deals in Oklahoma. What kind of deals? Why Oklahoma? And then condo in Texas, why a condo, why Texas, why not Oklahoma again? It sounds like you're kind of all over the place. So were you all over the place? You know, I would say it was a handful of markets. So when I really started kind of looking that I knew that, you know, the articles I was reading, jobs were going to Oklahoma, and you have to

break it down further into sub-markets. And same with Texas. That was kind of the, you know, I found a lot of good publications that jobs were coming. And I figured if jobs are coming, that must be a really good thing. Okay. Got it. Okay. So what is a fractured condo, by the way? Yeah, I was going to ask the same thing. And I wasn't looking at, I was just looking for apartment building. So I would just analyze deals one after another, and then periodically you come across these deals where you can buy a large portion of the condos within a complex. This one happened to be 41 of the 48 units, meaning you're buying 41 of them, but there's still seven others that are owned by outsiders. So they were primarily operated as rentals, and that's what we are going to continue to do, but they have a lot of differences

than just straight apartments. Who's we? You said we a few times. Sure. We, when I started off, was me and my mom. So she was my original partner and I've done some stuff with her. And that's kind of how I got started. I had a little bit of money, but my mom primarily did the financing on it. Or should I say the equity portion? And we also obtained bank financing on that first purchase too. So you're like young 20s and you bought 41 units, like straight out like your first deal. Was that 41 units? Yes. That's crazy. But awesome. I mean like, because most people are like, I'm going to start with a single family house or, you know, like a duplex maybe. I mean, how did you get the guts to do that? With helping my parents out with their condos and, you know, they have some townhouses and

apartments, I was kind of running around to five or six different areas. And it just really, the whole concept of multifamily made it consolidated. And going out of state, I really wanted to hit that threshold of a minimum of 40 units so I can pack in a little bit of overhead for a decent manager. Okay. Yeah, that makes sense. Got it. So how did you, how did you end up finding the property? was it like listed on the MLS or? You know, the place where good deals go to die, it was actually loop net. Oh, nice. You know, and I know typically it's always junk on there, but we made an offer.

I think we had got under contract for 25% less than they were originally asking. And, you know, the numbers really made sense on it. So we moved forward with it. Okay. So you mentioned that line that I've said a lot, that loop net's like where good deals go to die. Because like, the reason I usually say that is because like most, a lot of big commercial properties, multifamily apartment, things like that, they tend to get. like the brokers who lists them tend to send the deals out to all their buddies first and all of their clients.

And if no other clients want them, then they'll go and put it up around LoopNet. So it's kind of like, I feel like the leftovers. Now, that's not always the case. And I know a number of people I've talked to recently have found deals on LoopNet, which is, by the way, L-O-O-O-P-N-E-T dot com. If people want to check it out. But anyway, yeah, I mean, there are still deals to be found everywhere. I mean, the MLS is the same way, right? If you go look on like the normal M-L-L-S with an agent for a house, 99% of the deals suck, right?

But we don't need 99% of the deals. We need one. And so, you know, they're still there. So anyway, so okay, so you found this 41 unit and decided, you know, you're going to buy that thing. Your mom ended up putting the down payment down. You got a bank financing for the rest. Is that right? Correct. While it was under contract, too, that's when Hurricane I came through and hit it. So there was a substantial amount of damage. And when we started getting into it, we found out that we were going to end up having to fix a lot of stuff. So that's just kind of ended up being a real, you know, blessing in disguise. But I just think, you know, that's relevant to say. So what do you mean by blessing in disguise? So I didn't really know at the time. There was questions about what they would actually cover, but what ended up happening was we had an insurance adjuster come out and kind of going through all the motions. We ended up getting probably in excess of $200,000 in insurance claim proceeds.

Granted, it wasn't our insurance policy, but as the HOA, we took it over, so we got to replace all the roofs and, you know, upgrade pretty much the entire complex over the next year or two. Okay. Okay, cool. So next kind of question then on that, When you're financing a 41 out of 48 units, how does that even work?

I mean, like, is it just typical 20% down, 30% down bank loan? You know, we were originally going into the deal. It was really hard to find somebody who would finance that type of structure. And the original commitment was, I think, for 25% down. And then at the last minute, the bank changed it. And they said, I think they wanted like 40% down 35. And it was, you know, it was really tough because that was really just a lot of additional money to come up with. but my mom was able to do that.

But it was a really hard deal to finance at that time. Yeah, because I mean, it seems like with single units like that, you'd have to go get 41 loans, which of course you're not going to do. No, it was a commercial loan that, you know, encompassed all the units. And one of the things we structured was individual release provisions where I could sell a condo tomorrow if we needed money, which we never ended up doing that. But that was kind of one of the nice things I thought it gave us multiple exit strategies on it.

That's smart. That's really smart to think of that way, Yeah, I love that. So were those units occupied when you bought them or no? Yes, it was fully occupied. I think there was one or two that were vacant. So I'm just trying to understand. So the 41 units that you acquired, was that owned by a single owner or multiple owners at that point?

It was one owner. Okay, so there was one owner and they were renting out these, like, kind of like an apartment building essentially. Right. Got it. Okay. And how much did you spend on it and then how much total did you end up putting into it? Do you remember? So on that property, the purchase price, I believe it was a million $45,000.

And in terms of upgrades, we had that insurance money, so that was at least $200,000. But at the time, too, we were also upgrading all of the interiors. And we were primarily financing that out of all of the monthly cash flow. So I don't know what the exact number is. We spent quite a bit upgrading it over the years. Okay. But yeah, so $1,0.45. So then you mentioned earlier that you had, you wanted to be able to, you wanted to

make sure you got a larger property so you could budget and management. So maybe we can shift there real quick. How did you run management on that property? You know, I made a lot of mistakes. I initially hired somebody that had experience with a lower class of apartment and we were really trying to make this a little bit nicer place. And I learned a lot. And the other thing is I didn't realize that at the time, I think she had kind of a corporate background of fraud or at least some accusations of it. So I made that mistake. Yep, that's something that, you know, I thought was worthy of sharing. And I ended up running the complex myself for a while until I found a replacement manager. So you hired one person to live there, or did you hire a company?

She was an offsite manager, so she would come to the property every day or every couple of days. Okay. Got it. Now, so you made a few mistakes. How did you vet that manager that you did put in that you were happy with after you ran it yourself? You know, she had a lot of experience almost 25 years and running like a hundred plus apartment unit complex and just everything that she told me on the interview questions just really made sense and it was somebody who I wanted to run that business. Got it. And was she also offsite? Yes, she was off site. Cool. All right. So you've got this property. You paid a million bucks for it. You're 21 year old.

I mean, and all of a sudden, you know, you've got this little empire. It's generating debit cash. you're going out and getting a job now, right? No. No, why not? You know, it just started making sense the whole real estate thing. So I started looking at more deals and I kind of took a break of being very active. I was just kind of terrified because I knew we had bought a big property and, you know, I looked at my friends and I owed a lot more money of them.

I didn't own own my own home. So there was just a lot of uncertainty. So I was kind of scared to take that next big step. Was that enough that one, building, was that enough to finance your life? I'm assuming it had to be, right? I assume, you know, we were really spending a lot on the upgrades. So like, for example, doing new flooring appliances and HVAC, you know, I think we spent probably the net cash flow for the next few years was eaten up by it. So I was also kind of doing some things on the side to generate additional

income. So you're a rich, you know, filthy rich Mr. Magoo landlord now with a million dollar building and you're doing side jobs to make cash, right? Yeah. That's right. Okay. There you go. No, sorry. Sometimes you got to bang it in people's heads that, you know, just because you have this big building doesn't mean that you're filthy rich. It was me and the bank that owned it and my mom. Yeah, yeah, exactly, exactly. All right. And before we go on to kind of what came after that, how did having parents who invest in real estate, how did that affect you? I'm assuming that inspired you and gave you a lot of knowledge, yeah? Yeah, absolutely. You know, it's interesting. My mom was 100 percent. supportive regardless of what I did. My dad was, God bless his soul, a little bit of a naysayer telling me I wouldn't make any money unless I did all the repairs and management myself and that wasn't the road that I wanted to travel down. So it was really helpful to have that perspective.

Interesting. Yeah. And I'm guessing he did all his own work and kind of managed it himself, his whole life. Yes. Okay, yeah. So he's to you in a couple of years, Brandon. I do not do my own work anymore. No, but like it's easy to get up on my room for half of this again.

It is easy to get trapped in that. though. I mean, like, there, and I think that the thing that I fell into when I was younger is, like, I didn't, I was not like you, Jack, where I looked at it and I said, why would I pay that contractor $50 when I could go on that roof and nail in that shingle, right? So like, I kept thinking in terms of saving money. I didn't think in terms of scaling a business or I don't want to do this for the rest of my life. And so like, yeah, I was trapped in that for years that I'm going to do everything myself. And it's easy to do it. Now, I'm not saying it's bad people who do that. People listen to the show. A lot of them do their own work. And sometimes you need to do that. And

that's just a way of living. But, you know, I don't know, for me, I don't want to do that for the life. To be fair, I did that for about a year and I wouldn't trade those experiences for, you know, for anything in the world. So yeah, right on. It's nice to be able to know how to change a water heater if you need to, or at least then I can, I can tell you, like when a guy tells me it's $1,000 to change a water heater, I can say BS and hire someone else. So there you go. There you go. All right. So you've now got this property, this, you know, let's call it for kind of what it is, apartment building, really, of condos, generating cash for you. Where did that go? Did you end up actually acquiring the rest of the condos in the building? You know, how did it, do you still own it?

No, we actually sold that a couple months ago. But in 2013, that's when I kind of really started to look at everything I was doing and thinking, what did I want to do and try to clear myself of any other obligations other than real estate. And we ended up buying one person in their own five condos and that was my first attempt at doing an off-market deal and went ahead and structured a purchase of those and it was really easy since we were already on site we just had to get them upgraded and then now there was only two that we didn't own in the complex okay and then what you sold it and we sold it a couple of months ago but that was in 2013 so after we bought that it didn't require much work so i started looking for my next project and it was either going to be an apartment building

that was around the time prices had kind of been going up and it was hard to find a good deal. And I had been studying mobile home parks for about a year. And I just could have wrap my head around the business model. And I started doing a lot of direct mail marketing to both and going out there and looking at both type of assets and making offers and told myself whatever clicks next is what I'm going to buy. And it happened to be a turnaround mobile home park about 20 minutes away from the condos. Okay. Oh, let's say mobile home park. Most people, again, aren't drawn to that.

And most people don't like that, you know, when I grew up, I want to be a mobile home park owner. Like, that's not a thing. So what drew you to that? The idea of the tenants owning their own homes really appealed to me because then you didn't have those large capital expenditures that, you know, replacing roofs an entire complex. You didn't have to replace a pool. The people operated, you know, took care of whatever was in their home. And we were just in charge of the infrastructure. So that business model was really appealing to me in theory.

Oh, I could tell there's a story. No, there's a lot of stories. But to get to that point, when we bought a turnaround complex or a turnaround park, it was half vacant. So we had to originally bring in homes and try and get people to purchase them. Okay. So tell us about that experience about bringing homes. I mean, how do you buy a mobile home?

Where'd you buy them from what it cost to put them in and what do you sell them for? Sure. We just looked on Craigslist primarily and then other parts, I guess not parks, other, I guess, areas that were being redeveloped and the homes needed to be moved. We tried to target those people to bring in their own homes because it's a lot better when the actual homeowner transports their home into your park as opposed to buying it and needing to go through the fix up and rental, et cetera. So that was really, that's when I learned I didn't want to be involved in homes. So when I could incentivize a homeowner or a dealer to get a home in there, it just

made my life a lot easier. So how'd you do that? So we threw some ads out there on Craigslist, reached out to the dealers and offering to pay to bring in your home. You know, the transport costs could be around $1,600, $2,000, but then you have additional costs of utility connections, skirting. It can cost upwards of $4,000 to $5,000 depending on the specifics. So you offered to pay for all that, that $4 to $5,000 per person. Right. And then we asked them to sign an agreement that you'll keep your home in the park for a minimum amount of time. But the reality is, you know, once the home moves in there, I think it's like 95% chance that it'll never move again. So it's, you know, that gave us a little bit of security. So that worked. You were able to fill the park.

Yeah, absolutely. Because we, as of right now, that park, it was 20 spaces when we bought it, eight paying homes. And today we're at 19. Hopefully we'll have 20 within the next couple of months. That's awesome. That's awesome. Can you tell us real quick, for the people who, you know, have not heard the other episodes that we did on Mobile Home Park. Like one of them that comes of mine is Jefferson Lilly, and I don't remember what number it is, but we'll put it in the show notes. BiggerPockest.com is a show 208. I'll link to it. But for those people who maybe haven't listened that or it's been a while, what are the benefits of mobile home park investing? I mean, you already mentioned the people own their own house so you don't have those big expenses. What else is a good

reason to buy a mobile home park? I would say one of the big things, it's off the radar. When you look at apartment buildings, I feel like the returns aren't as great as you can generate in mobile home parks. Another big thing I like is the lower expense ratios. I see apartment buildings typically seem to run between maybe 50, 55 percent. And in a mobile home park, depending on who pays utilities, you might be looking at 30, 40 percent as your expenses. So that's, you know, a tremendous benefit. Another big thing is seller financing can be available if the person owns the property free and clear. And that seems to be kind of one of the, you know, nice things that you'll find on the occasional property. Is the one that you bought, did you seller finance that this problem?

No, we actually, we bought it for cash. It was really cheap. And we offered to seller finance it. And we would, I think we were going to pay a little bit more, but they just wanted the money at the time. Got it. Okay. So you've got this property. The idea was to turn it around.

So you did that? What did you do beyond filling it with trailers, with mobile homes? Did you do any infrastructural changes, improvements? What did that cost? All that stuff. Absolutely. You know, we ended up doing new signage in the front. There was a lot of cleanup, a lot of the infrastructure.

needed repair such as the electrical poles. We had to replace a lot of those pedestals. The roads were in rough shape, so we ended up doing some work on those. And just there was some people in there that were unsavvy. Those people left the park. And now it's like a really nice family community. I remember at the front of the park, there was a home that had a couple pit bulls in, you know, in front of a cage. And I would watch the kids at the bus go to the bus stop every day. And you could see the terrified look on their parents' faces. So we ended up buying, we ended up buying that house. And those people left. But I, you know, I really, like pit bulls, the only problem is the insurance companies don't really allow that to have those in your

park. So we, not only did we transform the property, we transform the community there. Yeah. You know, speaking of the pit bull thing that reminds me like we had a situation a couple months ago come up where, you know, based on, in my state, Washington state law. Yeah, you had an issue. Yeah, based on Washington law, in a lot of state's laws, it's you can't discriminate against a service animal or a emotional support animal. But insurance companies will not ensure a have, you have a, you have, house that has a pit bull in it. And so we had this kind of catch-22 where this lady applied and she had like, I think it was four pit bulls and they were all emotional support animals and she got a letter from an online doctor, which counts apparently. And so we had this problem where do we take

this tenant, we can't reject her for it. She qualified in every other way. And I mean, it's like this weird catch-22. And honestly, I still don't have an answer of what you do in that. I mean, other than we found a way to deny her that had nothing to do with the dogs because there was something. I don't remember what it was, but there was some reason that... I think you got a better tenant or something. I think so. Maybe, yeah, somebody else applied that was more qualified. We went to more qualified applicant or something like that. But it's a messy situation. You ever dealt with that, Jack? Yeah, absolutely. We actually had that situation on a property we took over this year.

And we got with our insurance carrier. It wasn't somebody that was looking to apply. It was a property that we already took over. And, you know, I'm not going to, I don't want to going any legal issues here. But we essentially wanted our insurance carriers blessing because it's kind of a double-edged sword. You can't discriminate against a service animal. But at the same time, if they're living there, how do you protect yourself

as a landlord? Yeah. And it's one of the things that you ask 19 lawyers and you get 25 different responses kind of thing. Like nobody has a good answer for this. So even talk to the housing and urban whatever people, you know, like the government, they don't have an answer for it. Nobody has an answer for it. Yeah, HUD, that's the word I was looking for.

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beat guarantee. That means faster closing, the best terms. Zero guesswork. That's Dominion financial. Check them out at biggerpockets.com slash dominion. Again, that's biggerpockets.com slash dominion. Hey, Jack, so why the negative stigma around mobile homes? Why is it that, you know, people just kind of look down upon it, investors often. You know, there's some parks out there that are obviously not well taken care of. Bad things happen to the properties, which make the news. Typically, you don't hear about the wonderful things happening. And there's a lot of really nice communities out there, too. You know, but D-class apartments, I would say, they, you know, are equally kind of have, you know, some stigma about them. But when you really go

into enough properties, you'll see the ones that might give it the typical name of a trailer park, but then you go to some other ones and they're like subdivisions. It's beautiful. It's amazing. So you just need to get out and see more of them then. Is that what it is? Is it just walking the parks or driving the parks to know they're good from the bad, similar to like neighborhoods? Right. Absolutely. And I mean, there's, you know, and there's an opportunity for for investors right now is trying to find those parks that are mismanaged and really cleaning them up and offering a clean and decent affordable place to live because that at the root that's the business. So let's talk about that. How do you find those parks that need to be turned around?

I mean, how did you find yours and how should I start looking? Sure, that was direct mail and I started kind of building our list. Yeah, you know, we were looking at what was on the market, but we kind of, after that five-unit condo deal, I thought it was really wonderful to buy that off market, not having a to deal with competing buyers. So I thought, man, this is what I'm going to do. It's brilliant. So I had a lot of people calling and I was checking out the properties. And before I even had a chance to check out this property, I just knew that this was my chance to get my feet wet with a mobile home park. But at the same time, I fell in love with direct mail and buying properties off market

because you didn't have to deal with, you know, agents. You got to deal directly with the property owner. And it was just a lot. It was a lot of fun. It wasn't, you know, it wasn't like sometimes the realtor, you know, broker seems to kind of get in the middle, not all of them, but it makes it hard when you need to go directly to the owner and try and resolve some issues on, you know, say, negotiations. Yeah, I love that, that you use direct mail for that. Yeah, that makes sense. Because, yeah, I mean, direct mail marketing, and that's not just mobile home.

If you guys are listening to this, some of you listen to the show. I mean, people are using direct mail marketing for, you know, single family, multifamily and obviously mobile home parks. Can you explain real quick, Jack, what, for those people have never heard that term before direct marketing? What is direct mail? And what did yours kind of look like, or what does yours look like? Mine was terrible.

You know, I just put together a letter that says, hey, you know, I'm looking to buy a mobile home park or apartment building and sent it out. I kind of got a list of all the properties that were around me and worked to compile it. And so that's how I created my mailing list. I would say actually the first time I did it, I bought it through list source, which, because I listened to bigger pockets and you read the forums for some stuff. And I thought, man, all these guys with single family, they go to this place called list source. And it was just a disaster that I started mailing tenants and everything. I had to spend a lot of time on creating my own list directly. So that's how I got it?

I mean, how do you do that? I mean, do you just driving around looking for mobile home parks or going to your courthouse? You know, there's there's some lists out there. There isn't one that's like 100% comprehensive. So I kind of go to a few different sources between county records, you know, websites. There's some lists circulating. there's kind of a health department that regulates certain public utilities because I've found where you get a complete list or, you know, allegedly complete list and then you have one property that's not on it. So it's, I don't know, there is no absolute right answer. And that's kind of one of the strengths is if you take the time to really develop it, it can give you a competitive advantage. I love that you said that because, I mean, people look at that, right? And so many people are like, oh, well, there isn't a big list. I guess I'm not going to do that because that's too hard, right? But in reality, that that is the strength. strength of that.

Absolutely. Most people won't do it and that you did. That's cool. All right. So what are the actual downsides? I mean, what are the negatives of owning a mobile home park? There aren't any. No, I'm just kidding.

Whoops. Depending on what type of utility system you have, if you go on private utilities, there's a lot more risk in regulation involved with those. So I primarily try and focus on ones that are municipal utilities just because that way you don't have to worry about poisoning the whole community because then it's the city who's responsible for the actual water quality. You know, it's a little bit different business. It has its own specifics with some of the clientele.

I'm trying to think what else is different. Do you find because you've got the clientele, I guess you, like, when I think of mobile home parks, I typically think of lower income people. And when I think of lower income people, I think it's more difficult to manage. I mean, generally the lower income, the more difficult. Do you find that true? I would say that's not true. And actually, that's one of the things I really enjoyed from transition.

While we were upgrading our condos and I had these mobile home parks, it was a lot more humbling to deal with people who had less money because, you know, you're going to sign a lease in a hundred degree weather and the person doesn't have any air conditioning. You know, so I wouldn't, you know, not everybody didn't have air conditioning. I don't want to paint the wrong picture. But, you know, and just in seeing all these families together and playing with their kids because some of the complaints we started getting as we made our condos nicer was, you know, just weird stuff like, oh, somebody flicked their cigarette butt in front of my door. I would never get that at my mobile home park. That is true. That is true. The nicer property is people tend to be a little more picky or, I don't want to say complain more, but I don't know, more easily offended maybe. I can see that.

Sure. So what should, I know we kind of covered this, but, you know, I'll ask it again, holistically. What should somebody look out for specifically when looking for mobile home parks? Is there something beyond what we had talked about that you kind of, that vibe that feel that you get, but that's, sets apart the good ones from the others. Or maybe I can even tweak that to say, you know, what sets apart the good opportunities from those that may not be as good? And how would you identify that? I think having a good market is really important. If you go to a really poor area, a mobile home park won't be very successful. If you go to a better area where there's a

large demand for housing, typically mobile home parks are going to do better in those areas. Essentially, when you go up in size, it's more desirable. There's a lot more people. There's a lot more people looking at it. So if you have 150 space park, you're going to have a lot more interest than, say, a 30 or 40 space park. And then below market rents, a lot of these properties will have low rent. So if you find one that's below market, you can kind of upgrade it or just raise the rent over the course of the next couple of years. Like, for example, the property when we bought it, the rents were probably 25 or 50 bucks under market. But the property was paying for the water bill for the tenants. So we didn't increase the rent. We just said, hey, from now on, you're going to pay your

water bill. And right away, you know, that took off a big expense off of our, you know, income statement. So those, any of those value ads are just wonderful. Or if you have vacant lots and you're not paying for that once you factor in the purchase price of, you know, the park, that's good because if you get a home in there, then you increase the equity and the cash flow on the park. Yeah. Cool. Cool. So what have you done since this mobile home park? I mean, the first one, have you bought more? What's your business a close? Yeah. Yeah. So we, we ended up buying a really small park that was down the street from this one. And at that time, I started really kind of aggressively building that direct mail marketing list. I hired a virtual assistant to help me with that. And we started looking

at kind of more areas instead of just maybe a two-hour radius. We started looking at kind of all over Texas and a few different markets around Illinois. And I just started kind of blasting out this direct mail. One of the phone calls I got was from a guy who was trying to sell like a $15 million property. And I thought, man, that's terrifying, right? And I looked at the number. and try to seriously evaluate it. And the deal actually made sense. I just didn't know what to do with it. And a couple months later,

I found that somebody else had bought the property and had earned an assignment fee on it. And I thought, man, that's kind of sucks because I could have earned that assignment fee. I just didn't know what to do. So that's what I spent the next few months doing is just kind of sending around a lot of direct mail. But I was really hoping to find our next property

that we could purchase. So you found this $15 million property. You didn't know how to deal with that you couldn't finance and you couldn't figure that out. So you moved on. Somebody else came in, found it, thought it was a good deal, and went and assigned it to somebody else who ended up buying it. That's what you're saying, correct?

Yes. And they made a fee for it, like a wholesale. So did you start to do that? Did you start wholesaling these parks? You know, I just saw that there was another tool in my tool belt when I kind of came across that situation and, you know, knowing that you kind of passed on that and then you saw how, you know, the end result was I just really, I found my next property, which I thought we were going to buy.

And I guess we were moving back to Illinois at the time. And I kind of started looking at some alternatives. So then I reached out to a couple of mobile home park operators I knew. And that was, you know, the first contract I ended up assigning. Got it. So basically for those people not familiar, assigning is that process of where you like put a property, you find a good deal, you put it under contract. and then you basically assign the contract or sort of sell the contract,

but you assign it over to somebody else for a fee. Did I get that pretty much right, Jack, on what you did there? So what does that look like in terms of like, do you mind what do you make on an assignment fee on something like that? Sure. Well, that deal, the purchase price was $550,000, and we ended up getting a $45,000 assignment fee on it. Whoa.

So that's more than the typical, like, you know, I'm going to go wholesale a house and make $3,000 off of it. 45,000 loan. I, you know, I've heard a little bit of a range on single family homes, but, you know, at the same time, I was passing on a big opportunity, which you could have increased the equity by six or 700,000 over the course the next few years. Sure. And why did you not just buy the property then instead?

You know, that one was a turnaround property and I wasn't going to be comfortable, you know, boomed back to Illinois and trying to run this one remotely. It just, I kind of had my concerns about doing it successfully. So that's why I thought, you know, that it made sense at that. the time. Yeah, that makes sense. And that makes sense. Yeah. Yeah, I mean, sometimes the best choice is just to have somebody else do the project because, you know, it doesn't fit with what you think you can do best at time. So I think that's cool. Sure. So now you kind of got into the business of basically wholesaling apartment, I mean, of mobile home parks, right? Right. Yeah, I was, you know, my primary focus was

trying to find the deal because I knew if I found the deal, I could either buy it or somebody else could. So I would either go into the deals thinking, man, I could buy this or sometimes I would, you know, start talking with somebody and say, hey, I got this lead on this property. Are you interested in it? They would say, yeah, we're interested in it. But, you know, the price needs to be $100,000 less than just, you know, trying to work like that. Yeah. Cool. So how many total deals have you done now?

I mean, between assignments and your own stuff? Just mobile home parks or everything. Yeah, I don't know. How about just mobile home parks? So mobile home parks in the last three years I've done 11 mobile home park deals where we either assign them, we partnered on them, or we own them ourselves. That's fantastic. Got it. That's cool.

So looking back now, like over the past, your kind of career, so to speak, since 2007, 2008, 2009, like what advice would you give your 2008 self about this whole journey? Probably to buy more property at that time because it was a good time. You know, prices were low. And right now we're kind of in a different point in the cycle, I think, where prices have kind of come up. Cap rates are down. And so I think it's just really important to really focus on trying to get good deals with value at an upside. Right on. So in terms of cap rate, is there an average cap rate you're looking for on a mobile home park?

It's funny, I was just browsing around last night and came across a park. And, you know, I had never actually looked at a mobile home park. And I was like, yeah, you know what? I wonder what these things should really be ranging in. So the timing is apropos that I get to ask you. So I guess 10 cap would be great, but now the market's really competitive. And as you get into the nicer properties, larger ones, you can get as low as, say, maybe like a seven cap or even six cap, five cap in some of the states like Colorado or,

you know, California, if they're really desirable properties. If it's a mess, it has things wrong with it, you might be able to go 12 cap or 15 cap. So there's a very large variance. I would say 10 cap is a really safe number. It's harder to find those deals. So if you go maybe a little bit lower with some value add upside, that can also make a, you know, a good purchase. Would you say that like, let's say I could get a 10 cap on a mobile home park or a 10 cap on a multifamily, an apartment complex? Now, theoretically speaking, a 10 cap, I should get the same return on my investment on either option. Would you say a 10 cap on an apartment is actually better or worse than a mobile home park?

I would say, so, you know, a couple months ago, before we sold our condos, I was at around 100 units, and now we're at 50 after we sold those, or about 50. And I would say, are a number of units decreased by, you know, half? But I would say my workload probably decreased by 85%. So I'm a real big proponent of the mobile home park business when you don't own the homes, because I feel it's structured, right? It can be a relatively passive investment. and it has a lot of benefits to it. So I feel like I'm going to get less gray hairs over the long term being in mobile home parks.

Yeah, it makes a lot of sense, actually. All right, so we're about to wrap up this part of the show. I've got one question left. I feel like we never closed an earlier discussion that we had. So you bought those five extra condos. Now you had two condos that you did not own in the complex. Did you end up buying those? Did you sell the whole building?

What did that look like? We didn't. But we sold, so we sold our deal as 46 out of 48, and I believe the buyer was able to get the other two wrapped up in that same purchase. Nice. And was that? How did you do on that? Yeah, I said, was it all worthwhile for you? Yeah, absolutely.

So, I mean, that was, you know, I was intending to hold it forever. And I just felt like the market was kind of going up. And I was, I didn't want to slap myself in the face in a couple of years and think, man, I, you know, really should have sold when I think the market was overvalued on some things. Yeah. So it was 100% worth it. That's awesome. I've been thinking that too lately. Like, you know, some properties I thought I was going to hold forever.

I'm like, eh, you know what? The market's pretty good right now. Yeah, yeah. You know, make hay while the sun is shining. Like, I don't know. So, cool. All right, well, awesome. I mean, I love that.

So my last question before we move on to the fire round, like going forward, what is your plan? I mean, where do you see yourself in the next five, 10, 20 years with your business? So right now it's just, I'm kind of spending some time to retool my business and try and figure out some better way to do things. And primarily just looking for deal. and, you know, now we have some capital. We can redeploy.

I also pay my mom back her money and, you know, significant profit of that. So that was wonderful. And, you know, she would like to reinvest. I've had other people approach me and they want to invest. But I'm just primarily looking for deals and then figuring out what to do once I find those. Very cool. Nice. That's awesome.

All right. Well, why don't we shift gears here and head over to the world famous Fire Round. It's time for the Fire Round. All right. let's do this. So today's fire round. These questions come direct out of the Bigger Pockets forums, which of course you can get to by going to biggerpockets.com forward slash forums. Let's do these fire round questions. Number one, what type of okay deals should investor pass up on to wait for great deals? I kind of like that question. Maybe it's kind of weirdly written,

but like should an investor, like, should a person who's starting out, we'll say, should they like bypass all the mediocre ones and only buy an amazing deal? Or should they just get their feet wet, buy something even if it's not amazing, if it's just a base hit, just to get in the game. I would really focus on getting an amazing deal because especially when you're starting out, you know, there's things you don't know, you don't know what you don't know. So it's real important to build in a big margin of safety. So if you get a mediocre deal, chances are it can go sour. I would really try and find something that's going to, you know, looks very promising.

Okay. Right on. Our next question. Is it easy to find partners in mobile home park deals to the need specific credentials? I don't know if you found partners outside of your mom, but yeah, absolutely. We did trying to really network with some of the people, you know, who might have a larger portfolio. You can check out their properties and see how they're operated. I think it's, you know, that's how I found my partners is just kind of networking.

Cool. Next one. I'm thinking of buying a, it's kind of similar, not mobile home parks, but mobile homes. I'm thinking of buying a few mobile homes as rental properties. Is that a bad idea? They just seem a lot cheaper than other houses in this area. You know, you can succeed with those. I originally had thought about doing that too.

I'm happy I didn't. But again, everyone has to start somewhere. So if, you know, if that's the difference between you getting started and not getting started, maybe you should consider it. Okay. Fair enough. By the way, guys, this is the Bigger Pockets podcast show 208. And you can check out the show notes at biggerpockets.com slash show 208. All right.

The question is, I've seen a lot of mobile home parks that are 55 plus. communities, should I avoid these? You know, it's a little bit different business. I actually looked at one a couple days ago, and she said one of the issues with TURN is that people are occasionally dying, so your tenants are kind of cycling. You also might have to offer different amenities because the people might, you know, require more, and they're on usually fixed income, so you might not be able to increase your rents, even if the market does.

So different business, not really what I'm looking for, but not to say you can't succeed with it. Right on. There we go. All right. Well, let's shift over one last time to the final section of today's show, which we lovingly refer to as our... Famous for...

All right, these are the same four questions. We ask every guest every week. And let's see what you've got to say. Number one, Jack, what is your favorite real estate book? You guys have a lot of good real estate books on the show. The ones I'll suggest one for mobile home parks. It's actually kind of a manual by Frank Rolf and Dave Reynolds about how to go through your due diligence when buying a mobile home.

park that is very important. So I think maybe the listeners would gain value from that. Is that what it's called? I think it's the due diligence manual. I'm not actually sure. I mean, if you Google it, you'll find it. Frank Rolf, Dave, right. What about a favorite business book?

The Intelligent Investor by Benjamin Graham. Good book. I've not read that one yet. People have recommended a lot. You're not an intelligent one. I'm not an intelligent investor, so I stay away from that. But I'll pick it up one of these days. I have this really bad habit of just buying books when I go to it, like, Goodwill.

And I'll walk out with a stack of like 20 books, and then I never read them. So I think that's somewhere in my stack. Studies show that households that have lots of books tend to produce children that are intelligent, despite their parents. Good. Good. Rosie has a chance, yes. Yes. No, no, no, no, no. All right. Jack, what do you do for fun? What kind of hobbies do you have? I found that every time I get a hobby, I seem to try and turn it into a business. And I think it's counterintuitive to having a hobby.

So I really just try and stay away from the hobbies in general. Most of my free time, I try and spend with my family. They're no fun. We have a 20-month-old daughter and three dogs, and that's enough to stay busy with. That is a lot, man. That is a lot. We're cool. All right.

My final question. What kind of dogs do you have? Pit bull and two pit bull lab mixes. Okay. All right. So you do like couples. I wouldn't be able to live in our, I wouldn't be able to live in one of our parks.

Yeah, they're, you know, and they actually, you know, we work with local, I guess, pit bull rescue group.

So it's kind of interesting to see, you know, sometimes people move to different places. They can't take the dogs. And it's just, it's kind of sad, but, okay.

That's cool. That's admirable. All right. My real last question. What do you believe sets apart successful real estate investors from all those who give up, fail or never get started. I grabbed a book from my daughter.

Do you mind if I share some wisdom with you guys from it? Sure. Sure. For those who can't see. By the way, that is the trolls, a song to sing, which I have to hear every day from my children right now, Poppy and crew. By the way, trolls is an amazing book for little girls. If you've got them, they love the book and it's all about empowerment, the movie I mean. So, check it out.

I think this summed it up really well. hey, I'm not giving up today. There's nothing getting in my way. And if you knock, knock me over, I will get back up again. There you go. That's awesome. I've never heard that before, but I don't watch kids movies. Come on.

I'm still in me like five little monkeys jumping on the bed stage. Jack, my kids would appreciate everything that just happened there. That was awesome. All right, man. Well, before we let you go, Where can people find out more about you? You can go on bigger pockets and you can find me there or you can go on my website, which is marvel equity.com.

Excellent, excellent. Well, I want to wish you lots of luck. Very, very impressive story. I love that you had the guts to go out and bite off more than I think a lot of people would want to bite off on their first deal. And so, you know, kudos to you for that. And congrats on the success of what you built up. And thanks so much for sharing your story with us.

Thanks for having me on, guys. I really appreciate it. Sure. All right, guys, that was Jack. BASEC. Big thanks to Jack for coming on the show. It was cool, man. Like I said earlier, like I was just digging around on the internet and found this mobile home park and the timing's pretty cool. I mean, it's just, you know, it's a fascinating space

that a lot of people don't really think about. And I do think that there's a lot of opportunity that's being overlooked. Yeah, I agree. I mean, this weekend, my wife and I sat down and we looked at our business and we said, you know, I'm kind of tired of buying like all these little deals. And I say that in yesterday, I put another little house under contract. But like, I'm tired of buying all these little properties. So I said in 2017, I only want to buy 50 units or greater. I want to buy one property all year, 50 units or greater. And let's see if I can make that a goal. And now doing this

podcast today, I'm like, man, maybe like maybe this is a 50 unit I should be looking for. It's a mobile home. Like I'm really, really, really intrigued by this. So I'm going to definitely dig in a little bit more. Maybe a hit up Jack and, you know, maybe go that route. You should do that. You should definitely do that. for New Year's resolution, you should resolve to shave and clean yourself a little bit. I mean, you don't want to see me. You look like hell, dude. When I'm shaved, I look like a 13-year-old girl. I mean, I normally sound like a 13-year-old girl, but I look like a 13-year-old girl. It's rough. It's walking comedy, man. Come on.

This is never coming off. This is going to be, I don't know, who's Motley Crew, are they ones with the big beards? I don't know, who's got the big beards. Z-Z-T Top? That's the word I was looking for. They're all the same, you know, all those crappy AD bands. Wow. Really? I don't listen to anything before like Backstreet Boys. That's my, that's my genesis of music. You're always into that. Like, oh, my life is so miserable and I hate myself and my parents. I'm so mad at them. You're still listening to that emo crap, aren't you? I'm still listening to that emo crap, you know? I'm a big fat of like dashboard confessionals or secondhand serenade. You know them at all? I don't know. Or a little punk rock like May Day Parade or All Time Loat? I love that stuff.

No, never heard of any of them. Do you want to try and name a band that I actually know? Keep going. I don't know. The O.C. Supertones? Nope. The, who do I listen to? Jack Johnson.

I listen to a lot of Jack Johnson. I've heard of Jack Johnson. Everyone's heard of Jack. He's a man because he like lives in Hawaii and surfs and then plays guitar and like on the beach. How does life get? Well, there you know. Nice. Nicely done.

I'm glad you, we found common. We found some common music. Yeah. Yeah, yeah. All right. Cool, man. Well, listen. Congrats on four years.

Thank you, too. Very exciting and great show and lots of luck in 2017. Let's all get out there and prosper guys. So with that, I'm Josh Dorkin. Sign it off. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing without all the height, you're in the right place. Be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online. Thank you all for listening to the Bigger Pockets Real Estate podcast.

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